Muskrat Falls: back to the basics

The Dunderdale government wants the Muskrat Falls debate to be focused on the two questions that constituted the terms of reference for the PUB review. Those two questions are: do we need the energy and, if so, is the Muskrat Falls development the least-cost alternative. It makes sense for them to attempt to keep the debate restricted to these two issues since all other peripheral reasons that have been offered up as part of a supportive rationale have been far from convincing. One such peripheral reason suggests that we should develop Muskrat Falls to enable us to “finally get around Quebec.”

There are no power purchase agreements in place with any customers outside our province and should they arise, it is clear that we would sell Muskrat Falls energy for about one-fifth of what it will cost us to produce and deliver it. Emera will get energy at no cost to them for 35 years and sell it to Nova Scotians at rates that will allow Emera and its shareholders to recover all of their investment in the project and reap a very handsome profit. The same company currently sells energy for us from the Upper Churchill at less of a profit than when Hydro-Québec used to sell it for us. As well, there is no existing capacity on the transmission lines in Atlantic Canada to allow us to get our Muskrat Falls energy into the same markets that Hydro-Québec is supplying. We physically can’t “get around Quebec” and compete with them with Muskrat Falls energy and, even more sadly, even if we could in the future, we would have to sell our Muskrat Falls energy at about one-fifth of what it costs us to produce it. Hardly a convincing rationale for developing any project.

A second such peripheral reason suggests that Muskrat Falls energy is needed for pending mining developments in Labrador. Nothing could be further from the truth. At the recent Provincial Mining Investor Forum, it became abundantly clear that this is not so.

The presenter for Adriana Resources indicated that “talks have already been launched with Hydro-Québec for energy” for their project in Labrador West. While it wasn’t stated in The Telegram article covering the event, the reason they are approaching Hydro-Québec is plain to see — energy from Hydro-Québec is a much

lower-cost alternative. If that reasoning is good enough for our government, it is equally good for any mining company trying to minimize costs and maximize profits. The lower-cost energy is from the Upper Churchill rather than the much more costly Muskrat Falls energy.

The only mining company that has made any mention of wanting Muskrat Falls energy is the one that just happens to have former premier Danny Williams as an adviser. Mr. Williams publicly stated rationale had nothing to do with lower costs. He simply stated, “I just can’t stand the notion of buying energy from Quebec.”

The only way any mining enterprise will want energy from Muskrat Falls is on a competitive, low-cost basis. That can only happen if we sell it to them for less than the cost of producing it. Again, hardly a convincing rationale for developing any project.

Since these arguments provide no rationale to proceed with the Muskrat Falls development, the government wants us to focus on whether we need the energy on the island and, if so, is Muskrat Falls the least-cost option to obtain that energy. To date, Nalcor and the Dunderdale government have failed to convince either of the two public project reviews of their case.

Neither the joint federal-provincial environmental panel nor the PUB concluded that the project was needed or that it was the least-cost option.

One thing is absolutely certain: the island of Newfoundland does not need over 800 megawatts of new energy, now or in the forseeable future.

While such a circumstance may be desireable or nice to have, it is absolutely not a necessity. That seems to be a distinction that Nalcor and the Dunderdale government don’t understand or don’t want to consider. Any shortfall, if it actually exists, can be met through a combination of small hydro developments on the island, wind power and conservation measures.

The same flawed logic is used when discussing whether we need to close Holyrood and use “cleaner” energy from Muskrat Falls. While it would be desirable to have the “cleaner” energy, it is not a necessity. Cleaner and less-costly alternatives are available for Holyrood by converting to natural gas or building a newer, gas-run facility.

In relation to the matter of “lowest or least-cost energy” it is more than possible that the board of directors of Newfoundland and Labrador Hydro may be in violation of the provincial legislation that established them and gives them their mandate. According to the legislation, the NLH board is mandated to only approve of projects and purchase energy that will be of the lowest cost to their customers. That makes sense, especially since we, as taxpayers and ratepayers, actually own the company. Since the inception of NLH, “least-cost options” have always been ranked on a scale of cost per kilowatt or megawatt delivered to the provincial grid and therefore available to be sold to customers.

Using such a scale today, energy from Muskrat Falls would come in last place as the most expensive energy per unit. Small hydro costs would be less than half of Muskrat Falls energy per unit, wind power would be about one half the cost, and even a refurbished Holyrood generating station would deliver energy to the grid at a significantly lower unit cost than Muskrat Falls.

So the premier and the minister of Natural Resources are left to muse that “we’ll freeze in the dark” if we don’t do the Muskrat Falls project and ”our energy costs are going to increase in any event.” The first circumstance can only happen if Nalcor and the Dunderdale government have been totally derelict in their duties. Conservation measures alone will ensure that it doesn’t. As for inevitable rising costs predicted by Nalcor and the government, only time will tell. But if we proceed with Muskrat Falls there will be guaranteed increases every year for the entire 55 years needed to pay off the project.

I have yet to see any sound financial or other rationale to support this development. We, as customers on the island, will pay the full cost through rate increases and taxes for the next 55 years.

Meanwhile, Emera and its shareholders will reap large profits and any mainland customers or mining enterprises in Labrador that end up accessing Muskrat Falls energy will actually get it for less than the cost of producing it. In other words, we, as the owners of the project, will give mainland users and mining companies a subsidy which will be part of our light bills. Just doesn’t sound or feel right to me.

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H JEFFORD

September 25, 2012 - 18:57

If the contract with Churchill falls is up in 2041 then build a transmission line to the island,and close Holyroods oil fired generating plant ,That burns millions of Gallons of oil per year,NFLD should have a recall clause on the contract in place now, if it is a copy of the original contract since NFLDs copy was destroyed in the plane crash while returning to NFLD aboard CFELCO. jet that crashed into No.6 Mine in LAB. city while returning to NFLD all aboard were killed. NFLD copy of the deal that WAS signed was destroyed, If NFLD do not have a transmission line in place by 2041 to carry Churchill Falls power,Then HQ is still in the drivers seat AND STILL IN POWER AND HAS ALL THE SAY OVER THE POWER FROM CHURCHILL FALLS. NFLD WILL BE ABLE TO USE THE POWER LINES IN PLACE NOW BUT AT WHAT COST, JUST LIKE MONOPLEY OPS YOU LANDED ON MY RAILWAY $

John Smith stated in one of his comments regarding the Muskrat Falls hydroelectric project that "This is not about making money...this is about supplying energy.This is not not about a business that you learned about in business 101...LOL...this is a government providing power for the province".
Where did this bloke from from? Has anyone ever heard the likes of that, it is not about making money, yet the project which will cost several Billions dollars is supposed to be underfunded each month by about 80 per cent when the mortgage becomes due over a 57 year period, while the hydro rate payers and tax payers of the province will be expected to come up with the extra costs of paying the mortgage each month, while Emera and the Mining companies get their energy at 80 per cent off the cost to produce. That is according to the figures I have seen touted. It is little wonder that they evoked Bill 29 which according to article in the address below in yesterday's The Telegram indicated that... A national audit has labelled Bill 29 as the year’s “biggest setback” to freedom of information in Canada. How are we to know the details when the questions in the upcoming debate in the House of Assembly are supposed to be very limited, according to Mr. Grimes, there will be just 2 questions. How will we ever decipher whether this is a good deal or not when Democracy is stifled by Bill 29 and the questions that will be allowed to be asked in the House during the debate on Muskrat Falls.
http://www.thetelegram.com/News/Local/2012-09-24/article-3081784/National-audit-is-critical-of-Bill-29/1

Verbal diarhea! Isn't John Smith funny with words. Could that describe John's talking points. But then he's just an average John. Let's see what he got right. Residential heat is the main driver of our power demand. I accept that point. And Nalcor in fact puts demand growth at about 1 percent a year. And with efficient heating we can reduce demand by at least 2 percent a year. Here is the arithemic: 160,000 average houses with 6 kw of heat reduced by 50 percent with efficient heating to using only 3 kw of heat = 3x160,000= 480Megawatt of demand reduction. This is much more than the 300 Mw the island is to get from Muskrat Falls. With conversions over 10 years = 48 MW reduction per year. Now John , I know you feel this is small minded thinking and lacks vision. But it will take a lot of local workmen and technicans to do these conversion. And it cuts the power bills by more than 30 percent to homeowners. (And you repeatedly complain about increasing power bills). But it will kill the demand needed for MF. But can you understand the arithemic John? If not , ask some child with grade 4 or so to help. Simple really. But no ribbon cutting required for this plan.Jurisdictions all over North America is jumping on this concept with much success.

If NFLD does not build muskrat falls,what would it cost to build the transmission line first,? Then have a transmission link to the island then on to the mainland when the contract with Quebec , EXPIRES IN 2041, WITHOUT a transmission line to transport power, Quebec will be like a monoply game " OPS you landed on out Power lines" you have to pay this $, The question " will the power be needed" is yes! Wind power is not reliable" Oil will increase in cost and one day will be gone But the Churchill Falls & Muskrat Falls witch ran for millions of years at no cost, will run for millions of years more, NFLD could one day be the power house of North America

Well Roger by darn it, you have done it now. You told the truth once again and every PC member has got their memo on the talking notes to go after your comments. Muskrat Falls is a bad decision to make a rich man wealthy. Danny Williams is profiting for this and we as taxpayers are lining his pockets. The PC caucus is still being ran by Danny the few spats with Dunderdale was optics at best.

and the third question: WHO WILL PAY FOR IT ? and anyone out there with a brain no's it will be the taxpayer. but there is a solution to all that muskrat falls mumble-jumble. lets have a referendum/election on the issue and let the people decide, we don't need another disasterous hydro project like the churchill falls deal.

@Trash...well trash, you are wrong on every point in your rant, as is usual with the mindless haters and naysayers on this site. As far as Emera goes, you can completely forget that part of the project. It was never costed into the deal. It was a way to make use of the unused portion of the development, untill we had a need for it here. We have additional power, why not utilize it instead of letting the potential run over the dam? Sounds logical to me. Let's see...hmmm what sounds better A) Letting the water spill over the dam, and getting nothing for it...B) Getting a 2 billion dollar link to the mainland, free access, and 200-400 million a year in revenue....I guess, Trash, you would rather see the water spill and get nothing? Wait, wait...you are one of those nit wits who thinks gas is the answer. Eventhough all the experts, including NOIA and the PUB, as well as Navigant and MHI, as well as many other experts have shown us countless times why it makes no sense whatsoever...you, and those of your ilk still think it is better to spend billions on topside conversions, pipelines, storage facillities, plant conversions, all so we could burn a fossill fuel that will expire in 50 or 60 years? Oh right...that makes so much more sense than a hydro dam that will go forever, and will not be subject to any future carbon tax. Oh and the plant in holyrood was shown to be in the top five worst percapita producers of pollution in canada.There will be a lot of need for power in this province in the future, God help us if there is not. We have the vale plant, the bull arm facillity, the shipyeard in marystown, the offshore has investments in the southern shore, and in argentia.However it is residential demand that is driving our need for expanded supplys of energy.You are a dupe my friend, and I pity you and those who are like minded. There are some of us who have vision for the future of this province, beyond living in mommie's basment, or sitting on the wharf waiting for the next dole cheque. There are some of us who can see beyond the political, childish rants of those on these pages. Those who offer no real alternative to Muskrat falls, just useless, mindless verbal diarhea.

Quite a choice you offer John. Spend billions to receive a couple of million in revenues selling power at below cost or spend nothing and receive nothing. Here's something I learned in business 101. If you sell a product for less than what it costs means that you lose money. Selling even more below the cost means that you lose even more money more quickly. Natural gas isn't being considered for the simple reason that NALCOR refuses to consider it. No costing has been done to determine what the comparative price for bringing gas onshore would be vs. the Muskrat Falls proposal. Hydro damns do not go forever, they have a finite life, and once that's over billions more will be needed to upgrade them. Residential demand driving a need for expanded supplies of energy? What's driving residential demand?? Government spending of our oil money. Guess what's going to dry up? You guessed it John, the oil, and when that's gone, you won't be able to rent a u-haul anywhere in the province. Where's your so called demand going to be then Polly? Oh yeah, evaporated more quickly than the support of the government that's trying to ram this useless boondoggle through. Well, on he bright side, you won't be anywhere to be found then. Your kind never is.

John Smith

September 25, 2012 - 08:05

Well, Mindless(apt name by the way)This is not about making money...this is about supplying energy.This is not not about a business that you learned about in business 101...LOL...this is a government providing power for the province. We tried the private route...AKA...the upper churchill.We have oil for the next 50 years here, so I don't think we should worry too much about that, but there will always be people and industry here, no matter what people like you always try to say. We will need the power, and the line across the gulf will prove to the world that we can get around quebec, and sell our product into the mainland market...even if we have to lay down additional lines.But mindless...the important thing is what is your alternative? How do you propose we generate the additional power we need? No answer? Typical of mindless people like you.

Pierre Neary

September 24, 2012 - 14:45

Mr. Grimes brings forward some interesting points. As a taxpayer I don’t want to be in the business of subsidizing mining companies.

John, my, my my the PC's need to get better talking points for you or you are suffering with the Dunderdale book of facts. "he 5th worst polluter in Canada" give us all a break Holyrood is not even in the top 50 (Dunderdale has the same problem with decimal points) Holyrood is not even # 1 in Newfoundland for emisions or did you forget "Come By Chance" At least Roger presented a reasonable argument all I ever hear from you is shooting down those who have legitimate questions. Roger may have debatable points but lets try to debat and not through out hyperbole and insults.

Just to be clear, the relevant exemption order-in-council exempts Nalcor, NL Hydro and the PUB from "all activities" (planning, economic, etc.) related to the "Labrador Hydro Project" (the definition of which includes ---- the Muskrat Falls project).....The exemption order seems therefore to be narrow and to not include Nalcor's, NL Hydro's and the PUB's continuing legislative obligation, pursuant to the Electricity Power Control Act, to provide ratepayers with the "lowest possible cost" power.... If so, Nalcor/NLHydro/PUB could still have a legislative duty to assess non-Muskrat Falls power sources so that a reasonable determination could be made as to which option is indeed the 'lowest possible cost'....

Muskrat is a bad idea-a money losing giveaway which will require subsidy from the NL consumer so that power can be sold at discount rates on the mainland. The question is will the present govermnent open their eyes and reject it or follow the arrogant high road they are travelling on in thinking that they have been given a mandate to do whatever thay damned well like, not for the NL people but to them and to their detriment. The best reasons that we have for killing this project include; Nova scotia, Quebec and mainland canada all like it, the much ABC'ed federal conservative government likes it and the money lenders like it. Let's not shoot ourselves in the feet, lets kill this thing now, let's not give back what we've gained from the offshore revenues. lets just get sensible and take the route of best economics.Let's just face up to it, Danny's quick idea to facilitae his gettting out just does not cut the mustard. Let the waters at Muskrat Falls flow freely until it can be used for our benefit not our detriment.

Brad Cabana, I, too, wonder if Newfoundland Labrador Hydro is breaking the law by not looking at ALL the options of providing energy that could be cheaper for our province. It is, indeed, a discussion whose time has come. Let's do it now!

Brad Cabana, I, too, wonder if Newfoundland Labrador Hydro is breaking the law by not looking at ALL the options of providing energy that could be cheaper for our province. It is, indeed, a discussion whose time has come. Let's do it now!

The world is a bizarre place and politicians are the most bizarre of all. This MF debate has put a magnifying glass on the mentality of politicians - former and present, PCs and Liberals alike. It seems that common sense is lost to them when they were in power. Something they seem to recover only after they've left office. Too bad they never practiced what they now preach. Imagine, in ten years time we'll get to hear Dunderdale or Kennedy criticize the next NDP government.

Wow...where do you start? There is so many glaring errors in this piece of trash it boggles the mind.First of all Emera is not getting free power, they are paying nearly two billion dollars for it, letting us transmitt over the line at no cost to us for 35 years, and then they will hand the line over to us in 35 years. Hardly free. We don't have contracts because we are selling on the spot market...hour to hour. If industry needs continue we won't be sending anything over that line so it won't matter untill we create more power at gull island or from the upper churchill.The mines don't care where they get their power, but they do need power to develop. The chance of NL building that much needed infrastructure is much higher than waiting around for HQ to build it. We all know how much QH loves NL, and want us to succeed...right Roger?The PUB did not reach any conclusion on muskrat, so that is an outright lie.The whole idea of gas at holyrood, small hydro, and conservation is small minded and weak. It would cost us billions to do so, and in a few years we would be back where we are today, looking for power. Our power bills have gone up by 70% since 1998, and continue to increase, we need additional sources of power. Anyone who can think long term knowns that Muskrat makes sense. It is not a piecemeal answer, a small dam there for a couple of billion, an upgrade to holyrood for a couple of billion, only to end up back at square one. Muskrat will provide us with all the power the province will need for the coming 50 years, it will provide a link to the mainland, allowing us to persue wind and other alternatives, it will provide 200-400 million a year in power sales, it will get rid of the 5th worst polluter in Canada, it will stableize our rates forever, it will get us off middle east oil and allow us to pay into our own provincailly owned resource. Roger is just repeating the same old tired rhetoric from the naysayers...small hydro and conservation...LOL give me a break. The Vale plant(Roger's claim to fame..LOL) alone will require 100 megawatts. Let alone the two GBSs we have under construction, the mines and the explosion of residential growth in the NEA. Go back to bed Roger, you were neve elected Premier, and for good reason. You always thought more of Hydro Quebec then you did of our own NL Hydro, why don't you move to Quebec and get a job with hydro, that would be about right. One thing I know is you should stop writing about something you know nothing about in a vain attemp to stay in the puplic eye. We didn't want you as premier, the party you led is at 15% in the polls, and nobody wants to hear from a retired school teacher about hydroelectric generation.

Awesome, Johnny Nalcor. We get an asset that has reached end-of-life (using Nalcor's own engineering standards) at the end of 35 years.
Even with your awesome speaking bullets, it doesn't take long for your message to fall apart....

William Daniels

September 24, 2012 - 14:48

John Smith, is your name really Tim Powers by any chance?

Speaking of trash

September 24, 2012 - 14:52

Gee John, where to start. The deal reached with Emera is no different than the Churchill Falls contract. Well, there's one small difference, Unlike HQ, Emera will pay no additional cost for power once they have met their capital commitment. Government must sell on the spot market because that's the market of last resort given they cannot secure long term contracts. Get ready for a NAFTA challenge on that one, private electrical producers in the states will not take kindly to NALCOR dumping power in their market at below production costs - you can write of any revenues in your business case from that source. You state that the infrastructure is ''much needed''. Much needed for what? If MF is not built, there's no need. HQ will sell to anyone that's willing to pay the going rate, they're a business, and their only agenda is profit. If purchasing power from HQ results in a lower total cost to ratepayers, they should be considered ahead of MF. There is more than enough Natural Gas offshore to double the production of MF over the same period and have plenty to spare. In additiona, natural gas can be used by major energy consumers for their own needs, taking demand off the grid. As for industrial demand, what industry? Corner Brook is on its last legs, and when that dinosaur runs out of government juice they'll be gone the way of the Dodo, both reducing demand as well as adding output from Deer Lake Hydro to the power grid. As for your advice to our former premier, why don't you take your own advice and stop writing your parroted talking points that have been disproved countless times. At least some people voted for Grimes. You, on the other hand, have never been elected.

Scott Free

September 24, 2012 - 15:03

note to William Daniels....by jove, I think you've hit the nail, er, the puppet, on the head!
Tomorrow's headline...."Dunderdale returns from brief meeting with Prorougie Steve; no guarantees on Muskrat, now, or ever!"
And, she's told to go home and tell Newfies what he instructed Little Man Dan to do; repeat after me, "you're a have province now...you don't need the Feds"...and, yes, Stevie can still remember the ABC and Dunderdale's campaign for Coady....

The "Terms of Reference" governing the Muskrat Falls debate should be wide in scope.

September 24, 2012 - 08:30

Ex-Premier Roger Grimes states "The Dunderdale government wants the Muskrat Falls debate to be focused on the two questions that constituted the terms of reference for the PUB review".
Here we go again where the "Terms of Reference" drawn up for questioning on the proposed Muskrat Falls contract for the Public Utilities Board review will be so narrow that all the stones that need to be overturned will not be looked under. Most likely the ordinary person of the electorate does not know that Reviews, Inquires, Royal Commissions, etc. have a "Term of Reference" attached to them that will only give the debaters the right to ask certain questions, not every question will be allowed to be asked. Our government has to stop the deceit of striking such investigations with disallowing all pertinent questions, so as to come up with the appropriate results to keep whatever subject being reviewed honest and above board. The Muskrat Falls debate questions should not be stifled, all questions need to be answered, there should be no restrictions, and all information should be put on the table so that we can decipher whether the risky Muskrat Falls Project should be allowed to go ahead.

The "Terms of Reference" on the Muskrat Falls debate need to be wide and far reaching so that all questions can be asked.

September 24, 2012 - 08:27

Ex-Premier Roger Grimes states "The Dunderdale government wants the Muskrat Falls debate to be focused on the two questions that constituted the terms of reference for the PUB review".
Here we go again where the "Terms of Reference" drawn up for questioning on the proposed Muskrat Falls contract for the Public Utilities Board review will be so narrow that all the stones that need to be overturned will not be looked under. Most likely the ordinary person of the electorate does not know that Reviews, Inquires, Royal Commissions, etc. have a "Term of Reference" attached to them that will only give the debaters the right to ask certain questions, not every question will be allowed to be asked. Our government has to stop the deceit of striking such investigations with disallowing all pertinent questions, so as to come up with the appropriate results to keep whatever subject being reviewed honest and above board. The Muskrat Falls debate questions should not be stifled, all questions need to be answered, there should be no restrictions, and all information should be put on the table so that we can decipher whether the risky Muskrat Falls Project should be allowed to go ahead.

No doubt the people who are trying to sell us on Muskrat Falls will attack Roger Grimes as this, that, and the other thing. It takes nothing to sit and snipe, but it takes courage to stand in your place against this government. Most of what he says here has been said before, but still remains very relevant. However, the question is Newfoundland Labrador Hydro breaking the law by not looking at ALL the options that would be cheaper is a discussion whose time has come.